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How to Choose a Financial Advisor and When to Hire Them

financial advisor financial planning Mar 27, 2024

When and How to Choose a Financial Advisor 

In an era where living longer is increasing, and traditional retirement is evolving from something our grandparents did, the importance of planning out the future of your money picture has never been greater. While some may enjoy and even embrace the idea of working later in life, well what entrepreneur doesn’t enjoy the chase... the desire for financial independence remains a common goal.  


But when is the right time to hire a financial professional for real help in this, and how do you know you've found the right one? 


As with any professional help, whether it be a mentor, professional coach, physical’s no surprise that studies also suggest that those who collaborate with financial professionals do better in achieving their financial goals too, while experiencing less money stress and anxiety along the way. However, with a plethora of titles and designations within the financial world, understanding exactly who to hire, and which one does what, can seem overwhelming when making your hiring decision. 


Advisor vs. Planner...What’s the Difference? 


The financial services industry, as with any other industry, has an array of terminology that gets thrown around and can be oftentimes confusing for the gen pops looking for simple terms. 


So let’s start with the most frequently used term, a financial advisor, an advisor is typically going to offer product-based or even driven guidance, recommending various investment and insurance products. It's important to understand many financial advisors get paid product commission and incentives, and this may not always be in the best interest of the consumer. So be sure to use a bit of caution with advisors who may not operate as fiduciaries, potentially prioritizing their products over your best interests. 


Ah, that silly word fiduciary...fiduc..what? 


A fiduciary is a person who holds an ethical and even legal relationship to put the best interest of the client in front of their own. Which leads to the other financial professional we’re talking about today, the financial planner. 


financial planner adopts a holistic approach, considering all aspects of an individual's financial life. From tax planning to estate planning, a financial planner addresses the broader financial landscape, aiming to align strategies with long-term goals. 


A financial planner is typically paid a fee to give advice and a financial plan. A financial planner is essentially your fianncial quarterback and works with your professional team to orchestrate the moving parts, like working with your CPA to implement tax strategies, or your attorney to implement estate planning or insurance agents to purchase life insurance when needed. 


The financial planner has a big job, they don’t just study a product offered by a company, they study your entire financial picture to ensure your overall financial longevity meets your goals and objectives. In order for them to do this they look at the 5 pillars of financial planning. 


The Five Pillars of Financial Planning 


Each pillar is a crucial part for you to achieve your goals of financial independence: 


  1. Tax Planning: 


As an entrepreneur, you're used to wearing a lot of hats. From operations to ensuring you’ve got a solid product and happy customers all the way down to making sure the lights are on, your plate is undoubtedly full. Through the hustle of running your business, one crucial thing often gets overlooked: tax planning. 

Tax planning involves strategically organizing your finances to minimize what you owe while maximizing your profits and doing this efficiently keeping your “down the road” in mind as well. For entrepreneurs, this means leveraging various deductions, credits, and incentives available for business owners to reduce taxable income and retain more of your hard-earned money. 

Tax planning is not just a once-a-year activity but an ongoing process. Proactive tax planning allows you to keep more of your profits in your pocket, not leaving Aunt IRS a tip. 


  1. Investment Management:  


Beyond selecting which stocks or bonds to put into your portfolio, investment management involves personalized strategies specific to something called your risk tolerances AND objectives. 

Being an entrepreneur is a long journey, at least we hope it is for you, but it means your ambitious innovative and relentless for success. We devote our time and energy to building and growing our businesses, but it's essential not to overlook another critical aspect of financial success: your investment picture. 

Investment management plays a pivotal role in turning these aspirations into reality. By crafting a comprehensive strategy that aligns with your objective, you can accumulate wealth while pursuing your business goals. This also allows you to adapt as circumstances change, entrepreneurs have a habit of putting every last ounce back into their business, but having diversification outside of your business will help you stay on track during a changing environment. 


  1. Risk Management:  


Protecting against unforeseen circumstances that could jeopardize your financial stability is imperative. Adequate insurance coverage mitigates potential risks. 


Entrepreneurship quite honestly is synonymous with risk-taking. From launching a business off the ground, to expansion and going through tough times, business owners are pros on embracing uncertainty and turning challenges into opportunities.  


Risk is inherent in every entrepreneurial journey. Whether it's financial risks, market volatility, operational challenges, or competitive pressures, entrepreneurs are often challenged with uncertainties that can impact their business. While some risks are unavoidable, successful entrepreneurs understand the importance of identifying, assessing, and managing risks proactively to minimize their impact and maximize opportunities for success. 

A financial planner will view risk management through the lens of personal and business insurance coverage, ensuring the business owner is Invested appropriately in insurance coverage to protect against unforeseen events such as property damage, liability exposure, or business interruptions. 


  1. Retirement Planning:  


Retirement planning is often overlooked by entrepreneurs who are focused on growing their businesses. It doesn’t always resonate because they oftentimes don’t picture themselves outside of their business, so sometimes it helps to consider financial independence instead. Working when and where you want to, instead of just working to pay the bills.  

Regardless of what you resonate with, planning for this time is important, as it goes faster than one might think. There are several items a financial planner is going to consider when putting together your retirement or financial independence plan. 

Let’s take a look... 

Starting early, the earlier you start saving for this financial independent time period in your life, the more time your money has to grow. Even small contributions made consistently over time can accumulate into a substantial retirement nest egg. 

Determining your FI (Financial Independence) goals, including your desired age, lifestyle, and income needs helps to create a plan, so your planner will typically start here, with your goals. 

Another area your planner will consider is what are you doing now? Are you taking advantage of tax-advantaged retirement accounts, like IRAs, Solo 401(k)s, or SEP IRAs. Or what other savings strategies do you have or want to have that will be important to include in your plan. 

It’s also important to look at diversification as it is vital to being financially independent, and this is something your planner will greatly consider. If you’re putting 100% of your profits back into your business, or you’re investing into real estate before you’ve got a full emergency fund, or you’ve got 100% of your portfolio into all equity when you’re ranked conservative on your risk tolerance score, there may need to be some changes made to your plan to meet your goals.  

Healthcare expenses can be significant at retirement age. Your planner will be factoring in healthcare costs when estimating your "FI” income needs. 

What about your Exit Strategy? Your eventual transition out of your business will happen someday and it’s an important consideration in the long term, sometimes it takes early planning, so at least having it as a part of your plan will help prepare your long-term picture. 

Retirement planning or financial independence planning is an important piece of your financial planning especially for entrepreneurs as you can see, so be sure you’re hiring the right financial professional for you. 


  1. Estate Planning:  


The final pillar in the financial planning process is Estate planning, and this plays a pivotal role in ensuring that your wishes are honored, and your assets are protected against anything you wouldn’t want. Estate planning basically involves creating a plan for the management and distribution of your assets in the event of your incapacity or passing. 


While some entrepreneurs may attempt to handle their estate planning on their own, seeking professional help is often advisable, especially for those with complex financial situations or unique estate planning needs. By working with experienced professionals, entrepreneurs can develop comprehensive estate plans that provide peace of mind that their legacy is safe for future generations. 


Who Needs a Financial Planner? 


While financial advisors may suffice for some, those in specific situations benefit most from working with a financial planner, especially one well-versed in tax planning. Individuals falling into any of the following categories should consider engaging a financial planner: 


Business owners or entrepreneurs 


Business owners face unique financial challenges, including cash flow management, tax planning, and business succession. A financial planner can help entrepreneurs navigate these challenges and develop strategies to optimize their personal and business finances. 


If you are a business owner with a net income of $250,000 or more, you could benefit from working with a financial planner. 


High-income earners 

Entrepreneurs with a high income, $250,000 for individuals or $400,000 for couples, may have additional financial considerations, such as tax planning, private wealth management, and wealth preservation. A financial planner can help high-income earners maximize their earnings, minimize taxes, and build long-term wealth. 


Individuals with a substantial net worth, whether in or out of retirement 


Entrepreneurs with complex financial situations, such as multiple income streams, investment properties, or stock options, may benefit from professional guidance to manage their finances effectively. A financial planner can provide expertise and insights to help simplify complex financial matters and make informed decisions. 


Entrepreneurs planning for retirement face unique challenges, including determining retirement savings goals, selecting retirement accounts, and creating income streams in retirement. A financial planner can help entrepreneurs develop a comprehensive retirement plan tailored to their needs and aspirations. 


Why a financial planner with a tax experience is important 


Tax expertise is often overlooked in financial planning. Many advisors fail to consider their clients' tax situations intricately, potentially costing them significant sums over time. Nearly every financial recommendation should be tailored to optimize tax efficiency, from retirement account contributions to investment strategies. 


In the pursuit of financial independence, the guidance of a knowledgeable and trustworthy advisor or planner can be invaluable. Whether you're navigating a complex tax situation or planning for your financial independence, finding professional guidance helps with accountability and peace of mind.  


Remember, the right advisor isn't just someone who manages your investments; they're a strategic partner invested in your long-term financial success. So, whether you're considering hiring a financial professional for the first time or evaluating your current advisor, prioritize expertise, transparency, and a commitment to your financial well-being. Your future self will thank you. 

Ready to take control of your financial future? If you're curious about working with us at Fit Wealth Advisors, feel free to reach out to discuss your goals, challenges, and aspirations. With the right guidance and support, you can create a roadmap to financial success and achieve your entrepreneurial dreams. 


About the Author: Amanda Hanquist 


Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Fit Wealth Advisors (Fit Wealth), makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third party websites that Fit Wealth may link to are not reviewed in their entirety for accuracy and Fit Wealth assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Fit Wealth. For more information about Fit Wealth, including our Form ADV brochures, please visit and search for our firm name.

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